Part 4

Pension schemes etc
Chapter 5

Registered pension schemes: tax charges

Charges on authorised payments

Short service refund lump sum charge
205
1
A charge to income tax, to be known as the short service refund lump sum charge, arises where a short service refund lump sum is paid by a registered pension scheme.
2
The person liable to the short service refund lump sum charge is the scheme administrator.
3
The scheme administrator is liable to the short service refund lump sum charge whether or not—
a
the scheme administrator, and
b
the person to whom the short service refund lump sum is paid,
are resident ... ... in the United Kingdom.
4
The rate of the charge is—
a
20% in respect of so much of the lump sum as does not exceed £20,000, and
b
50% in respect of so much (if any) of it as exceeds that limit.
5
The Treasury may by order amend subsection (4) so as to—
a
increase or decrease either or both of the rates for the time being specified in that subsection, or
b
increase the limit for the time being specified in paragraph (a) of that subsection.
6
Tax under this section is to be charged on the amount of the lump sum paid or, if the rules of the pension scheme permit the scheme administrator to deduct the tax before payment, on the amount of the lump sum before deduction of tax.
7
A short service refund lump sum is not to be treated as income for any purpose of the Tax Acts.
Pt. 4 modified (N.I.) (1.4.2006) by The Firemens Pension Scheme Order (Northern Ireland) 2006 (S.R. 2006/210), arts. 1(2), 103
S. 205 modified (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 3(1)(2), Sch. 3 Pt. 1
Pt. 4 modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 9, 10
Pt. 4 modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 12
Pt. 4 modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 13(5)
Pt. 4 modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 26
S. 205 applied by 2003 c. 1, s. 636A(3) (as inserted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 31 para. 11 (with Sch. 36))
Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284
Pt. 4 modified (31.12.2007) by Police and Justice Act 2006 (c. 48), s. 53(1), Sch. 3 para. 7; S.I. 2007/3203, art. 3(b)
Pt. 4 modified (1.7.2008) (N.I.) (with effect in accordance with reg. 1 of the amending Rule) by The Health and Social Care (Pension Scheme) Regulations (Northern Ireland) 2008 (S.R. 2008/256), regs. 1, 124(1) (with regs. 134, 258)
Pt. 4 modified by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), reg. 5A (as inserted (6.4.2006) by S.I. 2008/2990, arts. 1(1), 3)
Pt. 4 applied (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 18
Pt. 4 modified (19.7.2011) by Finance Act 2011 (c. 11), Sch. 18 para. 14(3)
Pt. 4 applied (with modifications) (with application in accordance with Sch. 22 para. 1 of the amending Act) by Finance Act 2013 (c. 29), Sch. 22 para. 1(2)
Words in s. 205(3) omitted (with effect in accordance with Sch. 46 para. 132 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 46 para. 121
Pt. 4 modified (17.7.2014) by Finance Act 2014 (c. 26), Sch. 6 para. 1(2)(3)
Percentage in s. 205(4)(b) substituted (24.3.2010 with effect for the tax year 2010-11 and subsequent tax years) by The Taxation of Pensions Schemes (Rates, etc) Order 2010 (S.I. 2010/536), arts. 1, 3(3)
Sum in s. 205(4)(a) substituted (24.3.2010 with effect for the tax year 2010-11 and subsequent tax years) by The Taxation of Pensions Schemes (Rates, etc) Order 2010 (S.I. 2010/536), arts. 1, 3(2)
Pt. 4: power to amend conferred (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), s. 4(3)
Pt. 4 modified (15.9.2016) by Finance Act 2016 (c. 24), Sch. 4 para. 1
Pt. 4 modified (15.9.2016) by Finance Act 2016 (c. 24), Sch. 4 para. 9(2)
Pt. 4 modified (with effect in relation to the tax year 2024-25 and subsequent tax years) by The MPs’, Senedd and Assembly Pension Schemes (Tax) Regulations 2025 (S.I. 2025/52), regs. 1(2)(3), 6
Words in s. 205(3) omitted (for the tax year 2025-26 and subsequent tax years) by virtue of Finance Act 2025 (c. 8), s. 40(4), Sch. 9 para. 15(3)(a)